Sugar industry in difficulty due to a double crisis

The Covid-19 pandemic raging in the context of Vietnam officially abolishing sugar import quotas from ASEAN members from January 1, 2020 is the difficulties pushing Vietnam's sugar industry into trouble.

Improving production efficiency and competitiveness is an important solution to help sugar companies overcome difficulties. Photo: Nguyen Thanh.

Shut down one third of a number of factories

Referring to the operation of the sugar industry since the beginning of the year, Mr. Nguyen Van Loc, General Secretary of the Vietnam Sugar Association, said the impact of the Covid-19 pandemicand social distancing forced schools to temporarily close, many festivals were cancelled, resulting in a decline in consumer demand in general and sugar in particular. Since the beginning of the year, businesses have sold little.

The leader of Thanh Thanh Cong-Bien Hoa Joint Stock Company (TTC Sugar) saidthe sugar industry is facing a double crisis. Specifically, the outbreak of Covid-19 from the beginning of January 2020 has led to a simultaneous suspension of production and economic trade activities and a serious decline in the demand for raw materials for production. That includes basic necessities like sugar. Besides, he also mentioned the wave of unfair competition of domestic sugar with imported Thai sugar since January 1, 2020 when the ASEAN Trade in Goods Agreement (ATIGA) officially came into effect.

"The Thai sugar industry has been subsidized by the Thai Government in various forms to boost exports, so the cheap sugar imported from Thailand has been pushing a series of Vietnamese sugar factories to close, because they cannot compete on production costs. It forces farmers to abandon sugarcane because sugar mills cannot afford the purchasing price to cover competition with other crops,” he said.

Giving specific statistics, Mr. Loc said: Due to the impact of smuggled sugar, the implementation of ATIGA and the Covid-19 pandemic, one third of a number of Vietnamese sugar factoriesclosed. Currently, only 29 sugar mills still operate, down by 12 factoriescompared to the previous year.

"Sugar is unsold, but businesses still have to try to raise sugarcane prices for farmers to keep sugarcane for the next crop. If there is nosolution, the sugar industry will not survive,”Mr. Loc said.

Sharing the actual story of the enterprise, Mr. Nguyen Van Tai, Director of the Sugar Processing Plant of Son La Sugar Joint Stock Company, said: The implementation of social distancing has halted food service and confectionery processing plants. From the beginning of the year to the end of April, Son La sugar consumption has decreased by 50% compared to the end of 2019. Currently, the Company has 40,000 tons of sugar in stock.

“Adversity is the mother of wisdom”

Analyzing the perspective of export goods, especially exports to the EU, the representative of TTC Sugar stated: Due to the impact of the Covid-19 pandemic, import and export ports in some EU countries are still closed, goods must be transported to the other ports, wasting time and raising prices. Currently, TTC Sugar is reducing difficulties throughstrategic cooperation with professional logistics partners to optimize distribution activities, bringing high quality sugar products to global consumers with the best prices.

Talking to reporters from Customs News, TTC Sugar's representative emphasized that his company enters into integration with the mind to turn challenges into opportunities. From the perspective of manufacturers and operators of sugarcane value chain, from now until 2021, in order to diversify the main product range, TTC Sugar's strategy is implemented throughout all customer channels, not only providing products but also providing solutions.

For example, with the B2C consumption channel (DN and Consumer-PV), the Company will bring products to catch up with modern culinary trends such as Co Ba clean sugar, Co Ba yellow sugar and cane liquid sugar, Queen black sugarwithout fading the traditional essence.

At the same time, TTC Sugar promotes the development of post-sugar products and agricultural product chains. The company is expected to increase the proportion of sugar and post-sugar products, significantly adding the proportion of products in the agricultural chain to meet the goal of stable and sustainable development. It is expected that, by the 2020-2021 fiscal year, the revenue structure of sugar and post-sugar products will increase by 30% compared to 15% inthe 2018-2019period.

RegardingSon La sugar cane, Mr. Nguyen Van Tai also said that the company are putting high expectations onthis summer. If the Covid-19 pandemicis still well controlled as at present, along with holidays such as Children's Day and the Mid-Autumn Festival, recovering cultural and social activities, the sugar demand for producing beverages, confectionery and food will increase very strongly.

About the overall solution to help the sugar industry overcome difficulties, according to Mr. Loc, the key is that businesses must improve production efficiency. In addition, the State also needs to have policies to support the sugar industry to overcome difficulties during the Covid-19 period, the impact of the implementation of the ATIGA as well as to actively prevent smuggled sugar.

According to the Vietnam Sugar Association, many businesses have now increased the purchase price of sugarcane to VND800,000-850,000 per ton, in some places even VND950,000 per ton, in order to encourage farmers to keep sugarcane for the next crop. However, this has led to higher production costs. It is estimated that the average cost of producing onekiloof white sugar of Vietnam's sugar industry in the crop year of 2019-2020 will increase by VND1,000-2,000 per kg compared to the estimate from the beginning of the season.